There is something not right about the world economy, or at least the older developed countries. The US seems to be doing reasonably well for now; but even here output is in any case still well below the pre-recession trend. The European economies are much further behind, which says something for the stimulus packages of the US administration, by comparison with the German-led sado-orthodox fiscal policies.

Lord Keynes set out a vision of world history in which there was a tendency for attempted savings to run ahead of perceived investment. He even formulated a “psychological law” that “changes in the rate of consumption are, in general in the same direction (though smaller in amount) as changes in the rate of income”. The result was a potential hole in the world economy with unnecessarily high unemployment. Various expedients helped to fill the hole. These included the building of pyramids and later cathedrals. For some decades after the second world war consumption did, contra-Keynes, seem to rise in line with income. But in the past few years all that has changed and Keynes’s psychological law seems to have re-emerged, opening up a gap between potential and actual output. What has happened? The cliché answer is the emergence of China, where a fantastically large proportion of its rapidly growing national income is said to be saved – more than can be invested domestically. “China” is of course a shorthand term for a group of high savings nations.

The important question is how the world deals with its excess savings potential. The first goody-goody answer is through the emergence of investment opportunities sufficient to absorb it. But these cannot be whisked into existence.